By The VGP Team

Financial Foundations for Veterinary Practices

Let’s be honest. Most of us did not get into veterinary medicine because we love reading financial statements. When someone says, “let’s review the P&L,” it does not usually spark excitement. But here’s the truth. Your numbers tell the story of your practice. And if you want to lead well, grow well, and sleep well at night, you have to understand that story. The good news? You do not need an accounting degree to do this.

Your P&L Is a Diagnostic Tool

I like to think of the Profit and Loss statement as a diagnostic tool. It shows you what happened over a period of time. Revenue came in. Expenses went out. What is left is your operating profit. Before you ever compare yourself to benchmarks or try to “fix” anything, you have to trust your data. That starts with a clean chart of accounts. If revenue is miscategorized or expenses are inconsistent month to month, you are not evaluating reality. You are evaluating messy data. Clean data leads to confident decisions.

Start with Revenue

Revenue is always the first place I look. Why? Because many “expense problems” are actually revenue problems in disguise. Breaking revenue into clear categories helps you understand what is driving growth. Are you maximizing doctor production? Are services priced appropriately? Are you charging for what you are already doing? High gross revenue alone does not guarantee profitability. What matters is how efficiently that revenue flows through your expense structure.

Benchmarks Give You Context

Benchmarks are not rigid rules, but they give you a healthy target.

For most general practices, we look at something close to:

• 20% Cost of Goods Sold

• 43% Compensation

• 17% Facility and Administrative

• 20% EBITDA

Each category tells a different story.

COGS includes inventory, laboratory expenses, cremation, medical waste, and rebates. If COGS is high, it may point to pricing issues, inventory management gaps, or missed rebate opportunities.

Compensation is not just payroll. Think all things staff. Doctor pay, team wages, benefits, health insurance, CE, appreciation, relief support. This is your biggest investment, and it should be aligned with productivity and revenue.

Facility and Administrative expenses are your fixed costs. Rent. Utilities. Maintenance. Marketing. Licenses. Merchant fees. These are the items that exist regardless of how busy you are.

What remains after those operating expenses is EBITDA.

Why EBITDA Matters

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is essentially your net operating income. The calculation removes financing decisions, tax environments, and accounting treatments so we can evaluate how the practice is performing operationally. It is an apples to apples look at profitability. Most practices fall between 9 and 14%. Our goal is at least 20%.

Why does that matter? Because EBITDA plays a major role in valuation. When the time comes to bring on a partner or sell, the value of your practice is typically calculated as a multiple of EBITDA. The higher your EBITDA, the stronger your position. Even if selling is years away, building a healthy EBITDA protects your options.

Trends, Budgets, and Dashboards

One month of data does not define your practice. Trends do. Always compare year over year. Look at patterns. Then create a plan. Budgets bring intention. They allow you to set targets for revenue and expenses instead of reacting after the fact.

Dashboards and KPIs bring visibility. Production per doctor. Revenue per visit. Average transaction charge. Labor percentage. These metrics help you connect daily behaviors to financial outcomes. You do not need to track everything at once. Start with what matters most right now.

What To Do This Week

Pull your most recent P&L. Make sure your categories are clean. Look at your percentages, not just your dollars, and compare them to a healthy target. Then pick one area to improve.

Financial leadership is not about perfection. It is about awareness and action. When you understand your numbers, you lead with clarity. You make decisions proactively instead of reactively, and you build a practice that supports your team, your clients, and your long term goals. Your financials are not something to fear. They are one of the most powerful tools you have.